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The gated community, a social form of showing who you are, show off, lifestyle or simply a discreet hideaway, is this what live if all about? Have people become too security concious? You decide!:) (Photo credit: || UggBoy♥UggGirl || PHOTO || WORLD || TRAVEL ||)

Sometimes large questions are buried in obscure pronouncements. So it is with PLR 201313031 which raises the question of what it means to "promote social welfare". The issue was whether the anonymous "ORG" qualified for exemption under 501(c)(4). Just for fun I am going to call ORG "Richistan HOA" in honor of the great book by Robert Frank

An organization is operated exclusively for the promotion of social welfare if it is primarily engaged in promoting in some way the common good and general welfare of the people of the community. An organization embraced within this section is one which is operated primarily for the purpose of bringing about civic betterments and social improvements.

Richistan HOA was focused on taking care of the roads and common areas of a fenced community consisting of 426 homes and a golf course. When Richistan HOA was recognized as a 501(c)(4), Richistan was not a gated community. Apparently the 99% would from time to time wander in and even drive their decrepit vehicles through. Richistan HOA decided to put a stop to that sort of thing. Here is what the examining agent found:

The organization spends an extraordinary amount of time and resources on security, which supports the examining agent's position that the ORG is trying and, very successfully, keeping people out. The security costs incurred in 20XX were $ or % of their expenses, and $ or % in 20XX. They provide and maintain security systems, guards, and gates. According to the December 20XX newsletter, about $ was spent on an upgrade to the security system, specifically the guard's computer, card readers and remote controls. This upgrade includes an alarm to the guard shack when a non-resident enters through the gates on a resident's tail. This is a huge expense to gather such information. They are very serious about keeping people out.

The examining agent accessed the 20XX — 20XX newsletters and board meeting minute notes from the organization's website. They reveal that, on average, *****% of the material discusses security issues. Notably, there is no discussion about outreach to the community. Most of the discussions center on incidents, such as break-ins, speeding reminders, and gate or security vehicle repairs. There are also specifically cited instances where the public was turned away or escorted off the premises. In April 20XX, two young women were at the clubhouse (CO-1 property), offering information about their spa to this exclusive community. They were told to leave. In May 20XX, representatives for a glass company were attempting to make sales at the homes and were “escorted through the south gate.” In February 20XX, some young people were trying to make their commissions in this upscale neighborhood by offering discounted or “bundled” cable television services to each home, successfully making some sales. However, it was quickly reported and the representatives were told to leave. The organization is quick to respond to the presence of the public inside their gates and is determined to keep them out.

Actually there are lots of these gated communities and I can see the attraction that they have. You can also mount a social criticism that as people create enclaves of security with private recreational facilities the infrastructure for the 99% might be left to crumble. Regardless of the merits of gated communities apparently the Service does not believe that keeping people out of your space is a community service:

The organization does not promote social welfare. Although the organization claims to be open to the general public, the records show that they place significant barriers with the goal of restricting the general public from accessing the grounds.

The addition of the security gates are a significant change to the organization's operations because they serve to exclude the general public from entering the property. Excluding the public does not conform to the definition of a §501(c)(4) organization. The organization is not operating according to the exempt purpose for which they received exempt status.....

The ORG does not operate for the good of the public. This is not in accordance with a 501(c)(4) organization.